Arrowhead Pharmaceuticals Inc (ARWR) 2019 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the Arrowhead Pharmaceuticals' Conference Call.

(Operator Instructions) I will now hand the conference call over to Vincent Anzalone, Vice President of the Investor Relations for Arrowhead.

Please go ahead, Vince.

Thanks, Carmen.

Good afternoon, everyone.

Thank you for joining us today to discuss Arrowhead's results for its fiscal year ended September 30, 2019.

With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the year; Dr. Bruce Given, our Chief Operating Officer and Head of R&D, who will discuss our clinical programs; and Ken Myszkowski, our Chief Financial Officer, who will give a review of the financials.

We will then open up the call to your questions.

Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

All statements other than statements of historical fact, including, without limitation, those with respect to Arrowhead's goals, plans and strategies are forward-looking statements.

These include statements regarding our expectations around the development, safety and efficacy of our drug candidates, projected cash runway and expected future development activities.

These statements represent management's current expectations and are inherently uncertain.

Thus actual results may differ materially.

Arrowhead disclaims any intent and undertakes no duty to update any of the forward-looking statements discussed on today's call.

You should refer to the discussions under Risk Factors in Arrowhead's annual report on Form 10-K and the company's quarterly reports on Form 10-Q for additional matters to be considered in this regard, including risks and other considerations that could cause actual results to vary from the presently expected results expressed in today's call.

I want to quickly acknowledge a couple of new analysts that recently began covering Arrowhead that will be on our call today for the first time.

They are Madhu Kumar from Baird and Alethia Young from Cantor Fitzgerald.

Both have covered Arrowhead at prior firms, and I'm happy to welcome them back.

With that said, I'd like to turn the call over to Chris Anzalone, President and CEO of the company.

Chris?

Thanks, Vince.

Good afternoon, everyone, and thank you for joining us today.

I want to start by welcoming the newest members of the Arrowhead management team, Dr. Javier San Martin, who joined us in the role of Chief Medical Officer; and Dr. Curt Bradshaw, who joins us as Chief Scientific Officer.

We are very fortunate to have these talented and seasoned leaders on the team.

I also want to say thank you to Dr. Bruce Given, who will be retiring on May 1, 2020.

He will continue in his current role over the next 6 months as he transitions responsibilities to Javier and Curt.

He has also agreed to remain in an advisory role to the company after May 1 as needed.

Bruce has been an important asset to Arrowhead for almost a decade and to the biopharma industry for over 30 years.

We wish him all the best during his retirement.

Now turning to our business and the progress we've made over the last year.

We have demonstrated, once again, that we can consistently achieve best-in-class speed and execution.

Arrowhead's TRiM platform is enormously flexible, and we have numerous and growing opportunities to develop innovative new medicines that address important medical conditions and potentially make differences in a lot of people's lives.

This is an enviable place to be in for any biotech company.

But technology and opportunity alone do not guarantee success.

We think our unwavering commitment to innovation is what really sets us apart.

There are now 5 TRiM-enabled candidates in the clinic, 3 of which are wholly owned and 2 are partnered.

Over the next month, we plan to submit regulatory filings for 2 additional clinical candidates.

And by the end of 2020, we intend to have 10 TRiM-enabled candidates in clinical studies targeting 4 different cell types.

Further, we expect to be in 3 pivotal studies by the end of 2020.

Let that all sink in for a moment.

We believe this is a strikingly unique position for a company our size.

We feel confident about our ability to achieve these aggressive targets, and we have good reason to believe in the ultimate success of these clinical programs for a number of reasons.

First, we have an increasingly validated technology in the TRiM platform.

Keep in mind that over 250 people have been treated with over 450 doses of TRiM-enabled candidates.

We continued to see very good activity and a benign safety profile in all programs.

Second, we focus on well-validated targets.

We tend to select gene targets where there is a widely accepted belief in the scientific community that if you can knock the target down, there will be clinical benefits without known negative phenotypes.

In other words, we leverage prior genetic studies to minimize our targets and biology risk.

With the expanding body of knowledge on genetics and ever-expanding published GWAS data sets, we believe new and interesting targets will continue to emerge.

Third, the RNAi field is just beginning what we believe to be a golden age.

This modality is increasingly accepted as a reliable and powerful way to treat a variety of diseases after 2 decades of intensive study and development.

While the potential and value of direct conjugation delivery in unlocking the potential of RNAi was clear to us by 2016, broader confidence took longer.

Interestingly, the increasing validation of RNAi is growing amid a backdrop of scarcity related to companies capable of leveraging it therapeutically and near absolute scarcity of bringing RNAi outside the liver.

We think we are probably years ahead of anyone else in this regard.

Lastly, and as we discussed at our R&D Day last month, Arrowhead is constantly finding innovative ways to shave days, weeks and even months off of the traditional development cycle.

We effectively try to take all the waste of time out of the R&D process without ever sacrificing quality or cutting regulatory corners, and we think we have demonstrated a level of speed and efficiency that has not been seen before.

So at once we are expanding the potential uses and upside of our technology while squeezing more and more risk and development time out of the programs.

This is a powerful idea, indeed.

During our R&day -- during our R&D Day last month, we went into some detail about several of our development programs.

I will now give a quick review of the day.

At the event, we discussed our 2 cardiometabolic candidates, one, ARO-APOC3, targeting apolipoprotein C-III being developed as a potential treatment for patients with severe hypertriglyceridemia and familial chylomicronemia syndrome or FCS.

And two, ARO-ANG3, targeting angiopoietin-like protein 3, been development -- being developed for treatment of dyslipidemias such as homozygous familial hypercholesterolemia, or HoFH, and metabolic diseases.

We believe that these are very powerful targets.

There is strong genetic validation that loss-of-function mutations in ANGPTL3 or APOC3 result in improved cardiovascular outcomes relative to the population at large.

Importantly, these loss-of-function mutations have not been associated with demonstrated adverse phenotypes, which means nobody has reported any symptoms or disease resulting from the loss of the protein.

This has also been demonstrated in the clinic with other agents using other mechanisms, which gives us confidence that the targets likely have multiple points of validation.

In addition, we believe that compounds using other mechanisms to reduce these proteins have vulnerabilities, positioning RNAi as an important potential new option for patients.

Bruce will discuss some specific clinical data from our Phase I studies that we recently presented at AHA on ARO-APOC3 and ARO-ANG3, but I will say that we have been thrilled with the results thus far and believe that they strongly support our plans to initiate Phase III studies in 2020.

We've seen deep reductions in triglycerides after single doses of ARO-APOC3 and believe there are relatively clear regulatory pathways to treat patients with rare conditions such as FCS as well as those with more common conditions leading to elevated triglycerides and associated pancreatitis.

ARO-ANG3 has even greater optionality and opportunities.

We expect it to lower triglycerides and LDL cholesterol, and previous studies suggest that we could expect it to improve insulin sensitivity and decrease liver fat.

Together, these are huge opportunities, and we believe ARO-ANG3 has the potential to treat a large variety of patients.

We also covered ARO-AAT, our second-generation subcutaneously administered RNAi therapeutic being developed as a treatment for liver disease associated with alpha-1 antitrypsin deficiency, which is a rare genetic disorder.

ARO-AAT is designed to reduce production of the mutant Z AAT protein by silencing the AAT gene in hepatocytes in order to potentially prevent accumulation of Z AAT in the liver, allow clearance of the accumulated protein, prevent repeated cycles of cellular damage and possibly prevent or even reverse the progression of liver fibrosis.

In preclinical studies in PiZ mice, RNAi treatment restored normal hepatocyte ultrastructure.

In our Phase I clinical study, ARO-AAT led to significant reductions in serum AAT levels down to the lower limits of quantitation with a long duration of effect that supports quarterly or even less frequent dosing.

We are currently conducting the SEQUOIA study, an adaptive design, potentially pivotal Phase II/III clinical study and AROAAT2002, which is an open-label Phase II clinical study to assess changes in a novel histological grading scale after 6 months, 12 months, 18 months and 24 months of treatment.

During the R&D Day, we also discussed our 3 most advanced preclinical candidates.

One, ARO-HSD against the target HSD17B13 been development -- sorry, being developed as a treatment for alcohol and non-alcohol-related liver diseases.

Published human genetic data indicate that a loss of function mutation in HSD17B13 provide strong protection against NASH cirrhosis and alcoholic hepatitis and cirrhosis with approximately 30% to 50% risk reduction compared to noncarriers.

We expect to file CTA for ARO-HSD by the end of the year.

Two, ARO-HIF2 against the target HIP-2 alpha being developed as a potential treatment for clear cell renal cell carcinoma or RCC.

This will be the first TRiM-enabled candidate targeting a tissue outside the liver to enter clinical trials.

We expect to file an IND for ARO-HIF2 before the end of the year.

And three, ARO-ENaC against the epithelial sodium channel, or ENaC, being developed to treat cystic fibrosis.

In cystic fibrosis patients, increased ENaC activity contributes to airway dehydration and reduced mucociliary transport.

Human genetic studies have validated ENaC as a CF target.

This will be our first inhaled candidate targeting lung tissue using the TRiM system.

IND-enabling studies are ongoing to support regulatory filings for first-in-human studies in 2020.

We also discussed broadly our product development strategy as we continued to expand our pipeline and detailed the guiding principles that make our R&D organization best-in-class for execution and speed.

In addition, we detailed advances in the TRiM system.

We presented our second-generation muscle delivery platform that is highly active and amenable to subcutaneous administration, and we also discussed a new TRiM dimer structure that delivers multiple siRNA sequences together that can achieve high levels of knockdown of 2 different genes simultaneously.

These important advances dramatically increased the number of potential diseases that we may be able to address over the coming years.

This gives us a distinct strategic and technical advantage over other RNAi companies.

It can also drive a significant amount of value for us and, more importantly, gives us the opportunity to potentially provide options for many patients without adequate treatments.

The R&D Day had a very informative set of presentations so I highly recommend that you listen to the replay on the website if you're looking to get detailed overview about Arrowhead.

In addition to the R&D Day, the period since the last conference call has been enormously productive.

Included in our accomplishments were the following.

One, we began dosing patients in the SEQUOIA study of ARO-AAT, our first potentially pivotal study.

Two, our collaborator, Janssen, began dosing patients in the REEF-1 Phase IIb triple combination study in 450 patients with chronic hepatitis B infection.

In connection with the start of the study, we earned a $25 million milestone payment from Janssen.

Three, we presented additional preclinical data on ARO-ENaC at the North American Cystic Fibrosis Conference, showing that ARO-ENaC can accelerate mucociliary clearance in normal sheep and also preserve airway physiology in a sheep disease model of impaired mucociliary clearance.

Four, with our collaborator, Janssen, we presented additional data on expanded cohorts of patients receiving the doublet of JNJ-3989, formerly called ARO-HBV, and a NUC.

And the first clinical data of triple HBV therapy, in this case, the triplet of JNJ-3989, the capsid assembly modulator JNJ-6379 and a NUC.

Five, we expanded our management team to include Javier San Martin as CMO and Curt Bradshaw as CSO, who I introduced at the outset of the call.

And six, lastly and most recently, we presented new clinical data on ARO-APOC3 and ARO-ANG3 in back-to-back late-breaker presentations, a very rare honor at the American Heart Association Scientific Sessions.

We've made a lot of progress this year, and we have great confidence that 2020 can be even more productive as we continue to expand our pipeline and begin to gain proof-of-concept in multiple extrahepatic tissues.

With that overview, I'd now like to turn the call over to Dr. Bruce Given.

Bruce?

Thank you, Chris.

Good afternoon, everyone.

I want to talk about data recently presented in 2 late-breaking oral presentations at the American Heart Association Scientific Sessions on our 2 wholly-owned cardiometabolic candidates, ARO-APOC3 and ARO-ANG3.

And then I'll give a status update on the clinical programs.

As Chris mentioned earlier, we were thrilled with the data for both ARO-APOC3 and ARO-ANG3.

The data were very well received at the conference and have continued to generate a good amount of attention since then.

I will start with ARO-APOC3, Arrowhead's subcutaneously administered RNAi therapeutic targeting apolipoprotein C-III being developed as a potential treatment for patients with hypertriglyceridemia.

The ARO-APOC3 first-in-human study is called ARO-APOC31001.

It is a Phase I single and multiple-dose study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamic effects of ARO-APOC3.

The single-dose portion of the study is in adult healthy volunteers and the multiple-dose portion includes patients with severe hypertriglyceridemia and familial chylomicronemia syndrome.

The second -- I'm sorry, the single-dose portion of the study was presented at AHA.

Consistent with our other clinical programs for liver-targeted TRiM-enabled candidates, the safety and tolerability appeared unremarkable for a first-in-human study.

40 subjects were enrolled to receive a single dose, where 24 received active drug and 16 placebo.

There were no serious or severe adverse events reported.

One adverse event, or AE, of moderate transient ALT elevation was reported with a peak of 210 units per liter on day 22 in a subject receiving ARO-APOC3.

This subject had elevated ALT at baseline and returned to baseline by day 85.

There were 8 local injection site reactions, all rated mild.

Moving on to activity.

We observed dose-dependent reductions in serum APOC3, with mean maximum reductions ranging from 72% to 94%.

Reductions were maintained through the end of study, which was 16 weeks after dosing, with mean reductions of 70% to 91%.

Reductions in triglycerides and VLDL cholesterol were also observed with mean maximum reduction in triglycerides ranging from 53% to 64%, and reductions in VLDL-C ranging from 53% to 68%.

Reductions were maintained through the end of the study with week 16 mean reductions of 41% to 55% for triglycerides and 42% to 53% for VLDL-C.

ARO-APOC3 also led to changes in LDL and HDL cholesterol.

The mean maximum reduction from baseline in serum LDL-C was 12% to 25% and the mean maximum increase from baseline in serum HDL-C was 30% to 69%.

Now let's turn to ARO-ANG3, Arrowhead's subcutaneously administered RNAi therapeutic targeting angiopoietin-like protein 3, or ANGPTL3, being developed as a potential treatment for patients with dyslipidemias and possible metabolic diseases.

The ARO-ANG3 first-in-human study is called AROANG1001.

It is a Phase I single and multiple-dose study to evaluate safety, tolerability, pharmacokinetic and pharmacodynamic effects of ARO-ANG3.

The single-dose portion of the study is in healthy volunteers and the multiple-dose portion includes patients with various types of dyslipidemia, including patients with nonalcoholic fatty liver disease, better known as NASH, patients on a stable statin treatment regimen with persistently elevated LDL cholesterol, patients with heterozygous or homozygous familial hypercholesterolemia and patients with hypertriglyceridemia.

Safety and tolerability for the single-dose portion of AROANG1001 was as expected and also consistent with prior clinical safety readouts for TRiM hepatic-targeted drugs.

40 subjects were enrolled, with 24 receiving active drug and 16 placebo.

No drug-related severe or serious AEs were observed.

Two AEs of mild transient elevations in ALT were observed: One in a subject receiving ARO-ANG3 and one in a subject receiving placebo.

The ALT elevation in one subject in ARO-ANG3 was confounded by concomitant ingestion of an herbal supplement with a known liver toxic profile.

There was also one mild local injection site reaction.

ARO-ANG3 was active across measures and had good durability.

Dose-dependent reductions in serum ANGPTL3 were observed with mean maximum reductions ranging from 55% to 83%.

Reductions were maintained through end of study with week 16 mean reductions of 43% to 75%.

Dose-dependent reductions in triglycerides and VLDL-C were also observed with mean maximum triglyceride reductions of 31% to 66% and VLDL-C reductions of 33 -- I'm sorry, 30% to 65%.

Reductions in triglyceride and VLDL-C were maintained through end of study in the 200-milligram and 300-milligram cohorts, with week 16 mean reductions of 47% to 53% for triglycerides and 49% to 51% for VLDL-C.

Changes in LDL and HDL cholesterol were also observed with mean maximum HDL-C reduced by 8% to 26% and LDL-C reduced by 9% to 30%.

Mean maximum reduction in LDL-C with the 200-milligram single dose was blunted by 2 subjects in this cohort with increased LDL post-dose.

The multiple-dose healthy volunteer data in 200-milligram dose demonstrates similar reductions to 100 and 300 milligrams of 33% to 46% reduction in LDL-C from baseline 2 weeks after a second dose, with the second dose given at week 4. I should say, when we say similar reductions, we mean for the 200-milligram dose relative to the 100 and 300-milligram dose.

Let me point out that both AHA presentations can be accessed from the Arrowhead website and are worth taking a look at if you haven't seen them already.

We feel very good about the data for both candidates, and we are currently enrolling and dosing the various multiple dose cohorts.

The data from these multiple-dose cohorts will inform our future development plans.

We hope to have those data in the first half of 2020 and intend to pursue abstract submissions to present at appropriate medical meetings.

I would now like to give an update on where we are with the other wholly-owned candidates and that are in or approaching the clinic.

I will start with ARO-AAT.

We started dosing the SEQUOIA adaptive design Phase II/III study in August.

SEQUOIA is designed to enroll 120 patients who will receive at least 9 doses or approximately 2 years of treatment with ARO-AAT or placebo.

By protocol, efficacy will be assessed by the proportion of ARO-AAT treated patients relative to placebo, achieving a 2-point improvement in a histological grading scale of alpha-1 antitrypsin deficiency associated liver disease and no worsening of liver fibrosis on end-of-study biopsy.

We intend to open around 40 sites in the U.S., Canada and Europe.

There are currently 7 sites open, and we are working diligently to bring more into the study as quickly as possible.

The second study we are running for ARO-AAT is AROAAT2002.

It is a pilot open-label multiple-dose Phase II study to assess changes in a novel histological activity scale in approximately 12 participants in 2 sequential cohorts.

2002 is now open for enrollment and will only be conducted in Europe.

Patient screening has begun, and some patients are expected to receive their first dose before year-end.

Moving on to our 2 candidates that are closest to submissions asking to start clinical trials.

First, ARO-HIF2 is our candidate being developed to treat clear cell renal cell carcinoma.

We are in the process of preparing the IND filing, which we anticipate before the end of the year.

Our plan is to launch a Phase I dose-ranging study in the U.S. This will be conducted in clear cell renal cell carcinoma patients that have had -- been refractory to immuno-oncology treatment with or without anti-VEGF agents or separately refractory to anti-VEGF monotherapy.

The primary objectives of this study will be safety as well as determination of Phase II dose.

Secondary objectives will include pharmacokinetics and then efficacy based on RECIST criteria using either CT or MRI imaging.

A key exploratory objective for ARO-HIF2 will be gene target knockdown in the tumors using tumor biopsy.

Lastly, I'll talk about our plans for ARO-HSD.

This is a somewhat new target in which genetic data indicates that loss-of-function mutations in the HSD17B13 enzyme provide the strongest known genetic protection against NASH cirrhosis and alcoholic hepatitis and cirrhosis.

One of the key challenges for the clinical program here is that there is no known serum biomarker for this target.

But the design of the first-in-human study is likely to resemble other Arrowhead Phase I/II studies.

Our plan is to do a single-dose study in normal volunteers and a multiple-dose study in patients with either suspected or documented NASH.

We think we'll have to do liver biopsies in this first trial to assess not only the depth of knockdown, but also the duration of effect.

The in-life portion of the GLP toxicology studies is complete, and we are awaiting results in order to prepare the regulatory submissions.

Our plan is to submit before the end of the year.

So we're pretty close in this one as well.

With that brief overview of our clinical programs, I'd like to turn the call over to Ken Myszkowski, Arrowhead's Chief Financial Officer.

Ken?

Thank you, Bruce, and good afternoon, everyone.

As we reported today, our net income for fiscal 2019 was $68 million or $0.69 per share based on 98.6 million weighted average shares outstanding.

This compares with a net loss of $54.5 million or $0.65 per share based on 83.6 million weighted average diluted shares outstanding for fiscal 2018.

Revenue for fiscal 2019 was $168.8 million compared to $16.1 million for fiscal 2018.

Revenue in the current period relates to the recognition of a portion of the upfront payments and milestones for our license and collaboration agreements with Janssen while revenue in the prior period related to the recognition of a portion of the upfront payments from our license and collaboration agreements with Amgen.

Revenue from the Janssen agreement will be recognized based on our estimate of the proportion of effort expended toward fulfilling our performance obligations, primarily overseeing the completion of the current Phase I/II HBV clinical trial.

In fiscal 2020, we anticipate recognizing approximately $80 million of the upfront payments and milestones already received that are currently reflected as deferred revenue in our balance sheet.

Any additional milestones achieved with Janssen or Amgen will be additive to this projection.

Total operating expenses for the year ended September 30, 2019, were $107.6 million compared to $72.1 million for the year ended September 30, 2018.

This increase is primarily due to increased drug manufacturing, toxicology and clinical trial costs as our pipeline of clinical candidates has increased.

Net cash by operating activities in fiscal 2019 was $173 million compared with net cash used in operating activities of $47.2 million for fiscal 2018.

The operating cash generated in fiscal 2019 reflects the $175 million upfront payment and 2 $25 million milestone payments received from Janssen, offset by cash used for operations.

Turning to our balance sheet.

Our cash and investments of cash balances totaled $302.9 million at September 30, 2019, compared to $76.5 million at September 30, 2018.

Increase in our cash and investments balances was driven by the payment received from Janssen.

Next year, we anticipate a $25 million to $30 million quarterly burn.

Our common shares outstanding at September 30, 2019, were 95.5 million.

With that brief overview, I will now turn the call back to Chris.

Thanks, Ken.

These are exciting and important times at Arrowhead.

We have always sought to follow science and drive the RNAi field forward with new innovation and technologies.

We'll continue this with a series of firsts for the industry.

I think that we'll see the first clinically-relevant oncology RNAi drug candidate in ARO-HIF2.

I think we'll have the first meaningful long-targeted RNAi drug candidate in ARO-ENaC.

I think we'll be the first to develop a muscle-targeted RNAi drug candidate, and I think we'll be the first to develop an RNAi drug candidate that silences 2 genes simultaneously.

Together, these significantly expand the universe of diseases and conditions we expect to treat.

The new cell types we are now able to target are key to our pipeline expansion model.

We hope -- my hope is that we will have early clinical validation for ARO-ENaC by the end of 2020.

That could serve as a springboard for rapidly expanding our lung franchise as we go after various gene targets for diseases such as COPD, asthma and pulmonary fibrosis.

We can develop some of these by ourselves and some in collaboration with partners.

Similarly, I expect that we could have early clinical validation for ARO-HIF2 by the end of 2020, and that could trigger a rapid push into new solid tumor types and new gene targets.

A bit further off, I expect to be filing to go into the clinic with our first muscle-targeted program by the end of 2020 with possible early clinical validation the following year.

We could then look to rapidly expand our pipeline with new muscle targets.

All of these are important in our push to continue Arrowhead's growth.

In 2018, ARO-AAT and ARO-HBV were sources of significant value creation at Arrowhead.

In 2019, ARO-APOC3 and ARO-ANG3 have combined with ARO-AAT and ARO-HBV to drive tremendous value growth for us.

So where do we go from here in 2020?

We believe the next big value drivers will be highly distributed, and that is helpful from a risk mitigation standpoint as well as from the standpoint of maximizing our growth potential.

I expect that you'll see a company with the following attributes.

A broad and deep pipeline, the ability to target 4 different cell types, a pipeline expansion model that is rapid and scalable and drug candidates with a good mix of early, mid- and late-stage clinical programs.

Most biopharma companies have historically sought to build value, sometimes substantial value as we saw today with Novartis' $9.7 billion acquisition of The Medicines Company by only developing one or a few drugs.

We have a different approach.

We have spent our time building out the TRiM platform with the hope that it could be the basis, not for 1 or 2 drugs, but potentially for dozens of drugs across many disease areas.

This is a truly exciting concept.

We are now well down that road, and as I mentioned early in the call, we expect there to be 10 TRiM-enabled drug candidates in the clinic by the end of next year, 3 of which we expect to be in pivotal studies.

I also believe that it is reasonable to expect that those 10 clinical candidates could double to 20 just 3 years later.

We have always believed that this is where we have been headed, and it now seems that the rest of the world is just starting to appreciate this.

Thanks again for joining us today.

I would now like to open the call to your questions.

Operator?

(Operator Instructions)

And our first question is from Ted Tenthoff with Piper Jefferies (sic) [Piper Jaffray].

Thank you so much for all the update and all the great progress.

Really exciting to see and just exciting times for the whole RNAi field.

So I'm so pleased to see the stock doing so well.

Just with respect to APOC3 and ANG3 with the data that you're presenting and the studies ongoing next year, and specifically with the interest expressed by Novartis for inclisiran, are you guys getting increased partnering inbound interest?

And what are your views on these assets?

Are these drugs that you would intend to take further yourselves or ultimately partner?

Ted, thanks very much.

So sure, I think it's fair to say that if we needed to partner those programs today, we could probably do that.

We don't think it's the right move for us at this point, however.

We talked about this in the past that one of the really important aspects of the Janssen deal for HBV and the other 3 targets is that it gave us capital and access to additional capital, especially when combined with the Amgen partnership to really think of our pipeline as portfolio we can take towards commercialization.

I think that in order to make that leap from a good biotech company to a large pharma company really takes -- it really takes the -- it really takes several drugs that you take into commercialization.

And look, we're really excited about APOC3 and ANGPTL3.

And so we have no interest right now partnering either of those.

We'll take those aggressively into later-stage clinical studies.

And it could be, at some point, that it might make sense to partner one of those or both of those.

But certainly, in the near to midterm, we have no appetite for that.

Our next question is from Madhu Kumar with R. W. Baird.

So I'll start with hepatitis B. So we understand the liver mean there's a discussion about the potential to publish the follow-up from the ARC-520, 521 patients and Phase Ib data for ARO-HBV.

Do you guys have any sense of timing for a potential publication of those results?

Madhu, it's Bruce.

I mean we're writing that now.

So we're far along, actually, in the preparation of the manuscript.

So submission, I would say, should come in the next few months.

That's not the same as sources -- of course, it's publication, and it's very hard to ever predict sort of what will happen in the review process and whether the comments will be easy to address very quickly or sometimes it just takes time to address the comments.

So it's a little hard to ever predict when publication will happen.

But we are actually writing it up and I do anticipate it being submitted fairly soon.

Okay.

And then on the LP(a) program, the AMG 890 win.

So in the K you mentioned that you expect Amgen to start the Phase II trial in the first half of 2020.

Is there any expectation when we may get data from the Phase I trial of 890?

No, we really don't have any guidance on that to ask Amgen about that.

Okay, fair.

And then stepping back and thinking about one thing you mentioned both in the R&D Day and this afternoon, the idea of dual target RNAi agents.

Are there disease areas which you specifically like to explore the idea of dual target RNAi drugs, things with a cardiometabolic disease, hepatitis B or some other space entirely?

Yes.

Look, I can answer that broadly.

Sure.

This is something we think about, and we've got some ideas on that.

It's not something that we're prepared to talk about publicly at this point.

But we think it's a really powerful tool to enable knocking down 2 genes simultaneously without making that combination product.

So we think of it as an important tool for disease, but also a nice tool from a regulatory standpoint.

And next question comes from Maury Raycroft with Jefferies.

Congrats on the progress and congrats to you, Bruce, for your retirement.

So to start, for APOC3, you're seeing a dose response, but the response on triglycerides and the VLDL-C is less clear.

So providing no safety concerns, what criteria are you focused on for dose selection moving forward?

Yes, that's a good question.

So you're right that there is more of a dose response for plasma concentration than for triglycerides.

And I think all that's really saying is that you don't need a 90-plus percent knockdown to necessarily maximize the benefit at the level of triglyceride reductions, at least in normal volunteers.

We'll see when we get into a patient population where they have specific genetic abnormalities whether that still holds or whether there's more of a need for higher dose there.

We just don't know at this point.

But we'll see.

We'll learn that, I think, from the multiple dose cohorts.

The other thing is, I would say that sometimes, multiple dose gives you a little bit different picture than single dose does.

So we're interested in seeing what happens with multiple dose.

But that interpretation of at least the single dose normal volunteer data, I would say, is correct, if that answers your question.

Definitely.

Yes, that's helpful.

And it's interesting for the ANG3 program.

So you showed some data where you dose twice with ARO-ANG3 at day 0 and at week 4, and the second dose does look better than the single dose.

So I'm wondering if you can comment qualitatively, if that second dose has had a durable effect with the LDL remaining reduced.

And how you're thinking about dosing with that agent.

I guess, with this program, could you potentially use some sort of a loading dose strategy for a few months and then do a maintenance dose every 3 or 6 months?

Yes, I think that's exactly what we're thinking.

And I mean, I think the normal -- the single dose normal volunteer data already tells you that the worst case is probably every 4-month dosing.

But we do believe that a loading dose makes a difference.

We came to that conclusion based on what we saw with AAT.

We anticipate we'll see the same thing with ARO-AAT, we anticipate we'll see the same thing here.

So we're going to be very interested to see what happens with that approach.

So just as we're dosing in SEQUOIA, day 1, day 28, and then every 3 months thereafter, I think the likelihood for APOC3 and ANGPTL3 is the worst case is likely to be day 1, day 28, and then every 4 months thereafter, that would be my current thinking.

We'll see what the data tells us.

But it could very well be day 1, day 28, and then every 6 months thereafter.

That would not surprise me at all based on how the single dose data is looking.

As for the first part of the question, that multi-dose data that we showed at AHA was pretty fresh data.

So I don't have a lot more data beyond that, to be honest with you.

So we -- over the next month or 2, we're going to start getting a much better idea of sort of how that multiple-dose data looks, both from a sort of depth and durability.

But certainly, that 6-week data after -- the 2 weeks after the second dose, 6 weeks overall, that was pretty intriguing data.

Got it.

Yes, that's helpful.

And last question is just on the NAFLD cohort 5 for ANG3.

If you can provide any more background in those patients, how severe are they and how many patients have you currently dosed.

Well, I can't tell you how many patients we currently dose because we kind of don't give those blow by blows.

And it's not that we were necessarily looking for severity, we required enough liver fat at baseline that we had dynamic range.

So we could certainly see whether we changed liver fat, but we weren't necessarily looking for severe "patients." It's enrolling.

It's enrolling fine and we'll certainly have data in our hands in the first half, I would expect.

It is double blind, so until all the patients are enrolled, and it reaches a certain point, we won't be unblinded.

But that's -- there's -- if it really is effective for this group of patients, which we hope it will be, we'll -- we should see relatively different results that sort of segregate the data much like we saw, for instance, for AAT.

So we should have a prudent idea fairly soon.

When exactly we'll be able to share that with The Street is a little hard for me to say at the moment.

And our next question is from Alethia Young with Cantor Fitzgerald.

This is Elemer on for Alethia.

So with the novel HSD target, do you have any thoughts from your preclinical work on any potential synergies with ANGPTL3 or any other NASH-specific targets?

Thoughts, yes.

But anything I could say out loud, no.

But I think you're thinking about that in the right way.

NASH is a tough disease.

And frankly, it's probably several tough diseases.

And I think, internally, we would not be surprised if that's going to be best treated with a cocktail approach.

And we are excited about attacking that in -- from several different approaches with HSD and with ANGPTL3 and potentially with others.

Got it.

So we'll stay tuned for that.

And then just on the platform, can you discuss some of the recent progress that you've made in extrahepatic targeting and specifically innovations that have enabled muscle cell targeting?

Well, yes.

Let me just say, what I've always said is that there's a reason that most everybody in the field that's been in RNAi for a while started with hepatocytes.

It is the easiest cell type to target for sure.

It's a -- we're targeted clearance receptor in a clearance organ that's designed to sweep the blood, and that has a very high rapid recycling rate.

It's just an optimal situation.

Once you get outside of hepatocytes, I wouldn't say outside the liver, even just outside of hepatocytes because even targeting other cell types in the liver like stellate cells, for instance, is much harder than targeting hepatocytes.

So once you get away from hepatocytes, now everything is harder, which means that to be effective in targeting other cell types now you have to play really, really perfect baseball, you've got to have a great trigger that's got to be optimally designed and modified, you've got to have a great targeting ligand.

Oftentimes, you have to do something that helps prolong circulation time, and they all have to play well together.

Even things like linkers that don't matter really for hepatocytes very much at all become very important when you go outside of hepatocytes.

So the reason other people really probably aren't very involved is because it's really, really hard.

So we're and not or.

So we still do hepatocyte targets frequently and do them well.

But we invested considerable effort over the last 8 or 9 years to stay after the non-hepatocyte targets, because we knew that in the long run, that was going to really pay off, and that was going to be very important for RNAi.

So even when we were a much smaller company, we always maintained a pretty active and scientifically-focused effort to make it outside the hepatocytes, and now it's bearing fruit.

So it bears fruit in muscle, bears fruit in the lung, it bears fruit with tumors as well, assuming all of our preclinical work translates into humans, which we have a decent reason to believe they will, but we still have to show.

And our next question comes from Mayank Mamtani with B. Riley FBR.

Congrats, team, on the progress.

Just if I may ask one follow-up to Chris.

Relative to your prior thoughts on PCSK9 relative to ANGPTL3, was there -- at AHA, when you saw your data versus obviously what we've seen from Medicines Company, were there any consideration that you thought as you think about the broader lipid indication for ANGPTL3 could you talk to?

Look, we're excited about ANGPTL3.

As we've talked about on a number of occasions, it's a fascinating pathway that we think will allow us to lower LDL, to lower triglycerides, to increase -- or to improve insulin sensitivity and to decrease liver fat.

I just -- I haven't seen a drug candidate that can attack so many different pathways associated with cardiovascular disease.

So look, we're really excited about that.

I think that the PCSK9 looks like they're pretty good drugs as well.

I don't want to compare them until we have the full data set across a number of different patient populations.

But look, we are as bullish as ever on this -- on the target, and in particular, on our own -- on ARO-ANG3.

We think it's a real winner for us.

And I think I would add to that.

Keep in mind that triglycerides are an independent risk factor, they're independent of LDL cholesterol.

So PCSK9 is kind of that last step in trying to exploit the LDL pathway for most patients.

There are going to be some genetic abnormalities in LDL metabolism that PCSK9s don't work for as well as statins and where ANGPTL3 could well turn out to be a useful drug, where PCSK9s just don't work.

But triglycerides are also a very important part of cardiovascular risk, just like LP(a) is.

And those are going to have to be addressed directly.

Statins aren't really -- don't do much and neither does a PCSK9.

So you know that the LDL part of ANGPTL3 is a pleasant kicker to its beneficial effects, but triglycerides are a big part of that story.

And that's totally -- that's something PCSK9s really aren't going to be of any -- very much value for.

And if I can ask a follow-up on that triglyceridemia as a condition and triglyceride as an endpoint.

Was there anything you thought we learned from the outcome that could basically help with this next leg of cholesterol lowering, if you may, as an acceptable endpoint?

You mean triglyceride lowering?

Yes.

I think it's a little hard to say just because those fish oils have a variety of effects.

I mean I think what it -- I think people were convinced that that's an effective drug.

And I think they're probably even convinced that the triglyceride reductions are beneficial and a helpful piece of that.

But ultimately, it's a little -- the thing that's different about ANGPTL3 and APOC3 is they're a little more pure drugs.

They do one thing, they knock down a protein and they result those effects.

The fish oil probably affects a variety of medical systems.

And it's a little harder, I think, to nail it down and say it reduced cardiovascular risk for this specific reason or that specific reason.

Certainly, the triglycerides helped, there was not a harmful effect, but what else is going on there, who knows.

Understood.

And then on the HSD program, I understand you're doing the healthy volunteer first.

But on the biopsy part, do you expect to do every 6-month biopsies or longer, given obviously the strong genetics you have on the cirrhotic protection part?

Yes, we haven't gone through the regulatory or IRB process yet.

So I'd rather hold off on describing the clinical study until we push through that.

But we recognize, as I tried to say in my remarks, that we need to understand both the depth and the duration and to try to find that out here in this first study.

So that's probably all the further I should go at this point, Mayank, in describing that.

Great.

And my final question on the extrahepatic.

Is there a first readout?

I know lung was one that we had been talking about for a while, but is kidney -- is a cancer readout going to be likely to be the first one where we see a signal?

It wouldn't be a surprise.

But keep in mind, cancer Phase I studies, that's not exactly like recruiting your normal sort of Phase I/II study.

Cancer, those studies oftentimes take 1 year, 1.5 years, even 2 years to enroll because you're looking for a specific type of patient in a specific cancer.

So I'm hesitant to try to give guidance on that.

It's possible that we'll get a read next year.

We certainly hope we'll get a read next year.

But I think it's -- I wouldn't get too far out over our skis on that one.

I mean we will try, we're hopeful, but I wouldn't consider that really the same as guidance.

(Operator Instructions)

And we have a question from the line of Keay Nakae with Chardan.

Bruce, just back to HSD and the biopsies.

Understanding that you certainly want to knock down data first, but is a patient that signs up for that, a patient, we think, is more willing to have a repeat biopsy further out that you could capture more information from?

Well, I mean, that's what they'll be consenting for.

So presumptively, they're going to be willing to do it.

We're -- the one thing we are not planning on doing in this study is we are not planning to biopsy patients to qualify.

We -- as long as they have suspected NASH or they have a previous diagnosis of NASH on biopsy, they get that initial biopsy, they're going to be able to get active drug and then get their follow-up biopsy.

So we're hoping that they'll be willing to do that, knowing that they don't run the risk of doing a biopsy and not qualifying for the study.

Because we're just looking for knockdown here.

We would like suspected NASH or NASH because that will certainly tell us whether there's any concern about how well they'll get knocked down when they have, obviously, significant fatty liver disease and probably, if they don't have NASH, they're heading that way.

So I hope that answers your question.

But yes, I mean, they will be consenting to 2 biopsies by agreeing to go into the cohort.

Okay.

And when do you anticipate you'll be able to provide us more information about that trial design?

I would think probably at the point that it gets cleared for moving forward.

So that would be likely to be in the first quarter, I would think.

That's the most likely case.

Thank you.

And this concludes our Q&A session.

I will turn the call back to Chris Anzalone for his final remarks.

Thanks everyone for joining us today, and I hope you all have a happy Thanksgiving weekend.

And thank you, ladies and gentlemen.

This concludes today's conference call.

Thank you for participating, you may now disconnect.